A top VC’s guide to Asia’s fastest-growing tech hubs

0:00This episode of Beyond the Valley is sponsored by the Singapore Week of Innovation and Technology by Enterprise Singapore.

0:13Investors are always on the hunt for the next big opportunity, especially when it comes to tech. Over the past decade, an increasing amount of that attention has shifted towards Asia. At the heart of this story is Singapore, a small city-state that's become a major gateway for companies and investors looking to tap into Asia's booming tech market. But how did Singapore build this reputation and what makes it such a critical player in the global tech landscape? Hello and welcome to Beyond the Valley. I'm Arjun Karpal and this is the first episode in a three-part series exploring Singapore's rise as an Asian tech hub.

0:51From serving as a home to major investors to becoming a key outpost for the world's biggest tech firms, I'll unpack how Singapore has carved out its role in an ever-changing industry. My guest for this episode is someone who knows this space inside out. Raj Ganguly, co-founder and co-CEO of global venture capital firm B Capital. Beyond the Valley. Raj, thanks so much for joining me on Beyond the Valley. Thanks, Arjun, for having me. So Raj, look, you co-founded BeCapital in 2015, and you were investing in Asia early on. What was it about the region that was exciting you at the time? So I've always found Asia to be really exciting.

1:37There's some personal bias here. I was born in India, and even though I grew up in the U.S., I spent a lot of my time as a kid back in India. I lived in Japan when I was in college. and I think what really excited me was in 2009, I got the opportunity to come out to Asia as part of my old firm, Bain Capital, and they were building Bain Capital's first funds in Asia. And I was just really blown away by how different the innovation was from what people in the Valley thought it was. I think in the Valley, we thought that what was happening in Asia was that there was people who were kind of taking business models that were proven in the U.S.

2:19and bringing them to China or bringing them to India and building kind of copycatting. And what I saw was there was fundamental innovation happening in Asia. And first, Asia is so broad. Unlike the U.S., Asia is not a single country. But I spent a lot of time between India, China, Japan, and Southeast Asia and was just really impressed by the ambition of the founders by how there was true innovation happening here. And third, the VC ecosystem here was just really small back then. And so when my partner Eduardo and I got a chance to partner up, we knew that Asia was going to be a big part of our thesis.

3:05Yeah, there's some really interesting points you made, Raj. When I was working in China for CNBC for three years, a lot of people would say to me, oh, it's just all copycat stuff out there, right? They're just copying the phones, the apps and everything else. And I was like, no, there's actually real innovation happening. And actually what you are seeing is some of the US companies trying to, you know, imitate to some extent what China was doing with say WeChat or, you know, look at TikTok and things like that. Do you think that perception has changed at all now? I think it has absolutely changed.

3:36I think, you know, just some of the companies that you mentioned from a TikTok, a WeChat, even some of the companies that we see in the biotech space and the deep tech space, there's real fundamental innovation that happens across Asia. And I think now founders in the U.S. are often saying, hey, we want to learn about what's the latest things happening in China or India or just broadly in Asia, because they're thinking about how can they bring models from Asia to the US. And it's fairly ironic that over a period of 15 years, how much more globalized the world of innovation has become. And of course, you have a big office in Singapore.

4:22I think your co-founder is based out there, Eduardo, as well. We've seen a lot of investors sort of start setting up shop there as well. You've seen companies setting up their APAC headquarters, big global companies setting up the APAC headquarters in Singapore. What sort of happened and why do you think that's been the case? You know, we got incredibly lucky. It's often just better be lucky than good. We were really lucky. My co-founder, Eduardo, was based in Singapore when we were thinking about where should we have our Asian and international headquarters. I think there was never a question that it should be in Singapore.

4:59It is this incredible place. It is so accessible to India, China, Southeast Asia, and frankly, the government here, the innovation ecosystem here, when we were starting off in 2015, we just found it to be a very pro-business, pro-innovation agenda. And frankly, everyone loves Singapore Airlines. It's the easiest way to get around the region. And I think it's, for us, we got here really early. Since then, what we've seen is that in the last decade, so many firms are saying that, hey, Singapore is the place to set up an Asian or an international headquarters, frankly, to the point where now I think Singapore is kind of the default choice of doing business in Asia.

5:50It wasn't a decade ago. I think it is now, and I think it will continue to be. It's just one of the most pro-business, pro-innovation countries that I've ever gotten to experience. In terms of how Singapore compares for its investor ecosystem to some of the big other hubs in the world, when you look at London has become a key part of that, of course, the West Coast of the US as well. Where does Singapore stand in relation from the investor point of view? Yeah, I mean, listen, I still think that Silicon Valley and Beijing are probably the two most diverse tech ecosystems in the world. But Singapore, for being a small country, is really, you know, they are punching above their weight class.

6:39And Singapore does so well because of the access that it provides to India, Indonesia, China, just three of the biggest markets in Asia. And so I think the industrial ecosystem, what's so cool, you know, compared to I love California. It's where I've been for the last two decades. To me, it is the mecca of the global innovation ecosystem. But I will say that what's cool about Singapore is that it is such a friendly ecosystem. All the investors support each other. I think we all know that it's important for the whole ecosystem to succeed. You want the other firms to succeed. The Valley is a pretty cutthroat place.

7:22And as much as I love being part of the tech ecosystem of the West Coast of the U.S., I've really enjoyed being a visitor. My co-founder, Eduardo, is firmly the guy who's really kind of built our presence here across Asia, but I've gotten to spend a lot of time here, and it's just such a cool and friendly tech ecosystem. One of the things I find interesting about Singapore is it seemed to become a key hub for investors and, as I said, sort of some of those big headquarters for global firms as well. But it hasn't had a huge amount of kind of big homegrown tech firms and successes. What do you think is the reason behind that kind of almost that paradox that's happened?

8:13Yeah. So listen, I'll start off by saying I think that there are tremendous companies like SIA, which is over$100 billion market cap, and what Forrest has done with that. I think you look at companies like Grab that didn't start in Singapore but are based out of Singapore now have had huge success. But I absolutely agree with you, Arjun, that the tech ecosystem here has not had as many of the big wins. Now, I think it takes time. I think we've all been excited about India as an example for so long. And only in the last few years are you seeing really big tech IPOs in India. And hopefully we'll see a few more this year and even more next year.

8:55So I think these things take time. What really has driven India is very different from what drove China. So China has an incredible market in China. You know it well. You've spent time there. So the domestic market is incredible in China. India really started off as much more of a cross-border enterprise SaaS market. And I think what's really changed about India in the last couple of years has been the local public market and the ability to IPO. I think what we need in Southeast Asia is we need founders who want to build really big companies and not just take smaller exits. I think second, we need the ability for these companies to be able to access multiple markets.

9:39You can't be a single market leader in Southeast Asia. I think you've got to be multi-market. And then third, I would love to see some more IPOs and more local IPOs. And if they're not Singapore IPOs, I think there's opportunities for companies here to exit in Hong Kong or even Japan and frankly, even in the US. And so we need those three things to happen. I'm a big believer it will happen, but it's taking a little bit longer than we would all want. Yeah, it's really interesting to hear you sort of lay out some of those challenges at the moment and things that kind of need to happen because there feels to be quite similar things happening here in Europe as well in terms of, you know, companies exiting quite early.

10:20But also when it comes to IPOs heading straight to the US because the markets are just not ready for tech IPOs here and not supportive of that. So that's really interesting. And you mentioned Asia, right? At the start, you mentioned how diverse it is. And now you're talking about India. Is this one of the big markets B Capital is investing in as exciting about? And if so, what are some of the specific things you're seeing in that market that's getting you excited? So India is our biggest market for investment. It's a market that we've been in from day one. We have an office in Bangalore. We are very active in the market.

10:58I think that the key to India is that you've got to find the right companies, but you've got to find them early. The IPO market in India, it's really exciting that you're seeing tech IPOs in India. I think that's something which in Europe, we want to see more tech IPOs in Europe. So it's exciting that a market that's as early as India is that you have tech IPOs. But those IPOs tend to be at kind of a 1, 2 billion valuation. There are exceptions. There have been 3, 4, 5, you know, Zomato type, you know, 10 plus billion IPOs also, but they're rare. So our belief in India is you have to get in early.

11:36You have to be willing to back these founders for a longer period of time. And that, you know, a lot of the founders in a market like India are first-time founders. So you have to be on the ground. And that's what we feel is very important, that we've got a team on the ground, that we, you know, view making the investment as really just the start of the journey. we were founders ourselves and we want to be you know great partners and value-add investors to every founder globally that we back but we feel like in a market like India or Southeast Asia it's probably a little bit more important even than in a market like Silicon Valley.

12:13It is the type of company that's being founded in India changing you know so far we've seen a lot in ed tech. We've seen a lot in consumer-focused applications. You think of companies like Ola or Zomato, as you mentioned as well. Are we beginning to see sort of more of an emphasis on some of these deep tech areas when we talk about AI and other areas? I think that's what's so cool about the Indian market. It really has been a combination of ed tech consumer tech and fintech historically but i think the go forward and i think the future of the indian tech ecosystem is building ai native apps india has been a clear leader in cross-border enterprise software and i believe that india will be a leader in cross-border ai apps india has the skill set they've got the knowledge indian developers indian entrepreneurs and ultimately I think that the AI app layer is where the money is going to be made.

13:17The LLMs, you know, I think largely most of the LLMs are built at this point. Maybe you'll see, you know, some more open source LLMs and I think this, you know, India has a real opportunity to be a global leader in building AI native apps built in India for the world and you're starting to see it. I think we're starting to see more and more founders in this space. There was a few dozen last year and there's, you know, there's a hundred plus this year and I'm sure next year it'll be an even larger number. So as much as, you know, I think India has been an exciting tech ecosystem for the last 10, 15 years, I'm actually more excited about the next decade of Indian tech than even the past decade.

14:02Wow. So this, when you see kind of where some of that value might be created from those founders in India, particularly around the AI stories on that application layer, building on top of kind of some of these LLMs that are out there. Yeah. I mean, I think that, you know, for a while there was this belief that, oh no, India has to build its own sovereign LLMs. And I think what now people realize is there's plenty of LLMs in the market between the open AIs and the anthropics in the US and DeepSeek and, other open source models in China, there's more than enough LLMs. Really the opportunity now and where I think the profit pools will be is in that AI native app layer.

14:44And I think the really cool thing about Indian founders and Indian developers in this space is they're building AI native apps that are really LLM agnostic. So they can work on top of any LLM. And I think that's what a lot of countries and a lot of companies want. They want apps that are not dependent on a single LLM and are able to, you know, by being LLM agnostic, you could also drive down the cost of the tokens and leveraging the underlying LLM. So I think India has a real advantage in this space. I hope that Indian developers continue to develop in this space. And I think you're going to see some of these companies that are built in India become market leaders in markets like the US and Europe over the next five years.

15:33Raj, you grew up in India. My parents are from India. So we know cricket's a huge part of the culture. How much time do you spend debating who's the best cricket team with the Indian founders you meet? You know, I was born in Kolkata. We have a team called the Kolkata Knight Riders. I'm biased. I don't know cricket as well as I should. My father who lives back in Kolkata is a big cricket fan. So I learned through him, but I will say I'm loyal to Kolkata, the city that I was born in. So I root for them. Yeah. It might be a bit harder in the US always to access cricket, but I know they're trying to make a big push.

16:13We have cricket coming. I mean, we have so many Indian founders in the Valley that I think you can put together a great cricket league just from all the Indian developers who are based in the valley in the u.s that'd be incredible um roger another market i want to i want to just touch on is china of course it was once so highly regarded by by venture everyone was excited about it what it did on it uh but you know there has been significant changes in that market over the last few years particularly as we look at sort of some of the regulatory tightening, the changes to the relationship between private enterprise and the government, although that seems to be kind of loosening to some extent, as an investor, are you still interested?

16:58Yeah, it's a great question. I mean, we had a China fund in the past. We are not as active in China at this point. And really, the reason we became less active in China is we just started to see better opportunities in other parts of Asia, but also the regulatory challenges between navigating different governments from the Chinese government to the US government. As venture capitalists, we want to invest in incredible founders who are leveraging really kind of transformative technologies and building these big businesses. And when suddenly we have to spend so much time on regulation, between multiple countries.

17:42But on top of that, the exit markets in China, which were incredibly liquid for a decade, really tightened up. And investors in China weren't as interested in tech companies that weren't making profits. And so I think China's done a lot to improve the situation in the past year. You've seen the Chinese stock market's really been on a tear. And I'm hopeful that at some point that the conditions will improve for us as a global investor to invest in China again. Executive Decisions is the new podcast from CNBC, where I ask powerful leaders about their decisions that changed everything. I'm Steve Sedgwick, and here's the CEO of Siemens Energy, Christian Brueck.

18:23Raj Ganguly:Business leaders should not stay quiet in a world which is super complex. We sit in a privileged position and we have to use that to ensure that society remains prosperous, stable, successful. That's Executive Decisions with me, Steve Sedgwick. Get it wherever you're listening to this. And you mentioned sort of opportunities elsewhere. One of the more recent pushes from you guys is over in the Middle East. What's exciting there? Because again, we talk about, you know, Asia, but it's such a diverse market, as is the Middle East to some extent as well. So how are you approaching that market and what's exciting you there?

19:00The Middle East is a market where we've opened an office in Doha. We view Doha and Qatar in a similar way to the way we view Singapore, which is that it is an incredible springboard. It's a government that is very pro-innovation, very pro-business, and it is a great springboard for us to invest into the GCC. see we now have dedicated funds that invest in emerging Asia. And emerging Asia for us very much includes the Middle East. Of course, it includes India and Southeast Asia also. And what we're finding over there is that there is some great fintech founders in economies from countries like Dubai or cities like Dubai.

19:45We're seeing some of them in places like Bahrain. And the biggest market there is obviously Saudi. But what's exciting is the next generation of founders that we're seeing are, yes, there's the fintech and the consumer tech and kind of what you saw in India over the last 10, 15 years, but it is such an incredibly young population. And there's so much support around AI. And frankly, the market there has the energy to really power AI. And we talk enough about the energy needs of AI, but the GCC has it. And we think AI native apps, it's very, very early days, is an exciting space. But frankly, I'd even say maybe the more exciting space that we're seeing there is service businesses, tech service businesses that were built pre-generative AI, but now you can incorporate generative AI into these businesses.

20:37These are businesses that are already profitable, different from some other places where you have a lot of unprofitable high growth tech businesses you actually see profitable businesses in the middle east where you can invest into them and you can help them incorporate and adopt ai make them even more profitable make them grow faster and then i also think that there's a huge opportunity for indian and other founders in the region to re-domicile in the middle east get access to really high profit customer pools and also access to capital. So we're looking at all of this. We think that the GCC in the Middle East is just an incredibly exciting place to invest for the next decade.

21:20Very early, very, very early days, but we're not afraid to invest in an ecosystem relatively early. That's really interesting. Look, your fund has been around for, what, 10 years or so. It's gone through the boons and busts of COVID, the new wave of AI. What have been some of the biggest changes you've seen in tech in your time? Yeah. Wow. So I've been doing this for 18 years. And before that, I was a founder and did some other things. And I really feel like I've gotten a front row seat to seeing how tech has changed. When I started it, you know, working in tech in the late 90s, and I'll date myself.

22:01Tech was, you know, it was booming. We were going through the first dot-com era. But tech was still a relatively, you know, it was viewed as an industry. There was, you know, a small number of big tech companies. And the world was really dominated back then by oil and gas companies and telephone companies. And, I mean, you look at what were the biggest companies in the world, very different list from the list today. and I think the coolest part of what we get to do is that we get a front row seat to seeing these incredible founders who are not just imagining a different future but who are actually working on making a reality and you know the biggest things that I've seen the the three biggest shifts I've seen is one when I started in tech tech meant one place Silicon Valley I still think and especially with generative AI, I think Silicon Valley is back in a big way.

22:54But even then, it is no longer 80 to 90 % of the global innovation ecosystem. It's less than half, which is still huge in a global world. Second is, it used to be to start a company took a lot. You had to buy computers, you had to hire programmers, you had to have multiple founders, a business founder and a technical founder. And now with AI, cloud, mobility, you can be a solo founder. And I actually think that we're living through the best time in history to be a founder of a tech company. With AI and all of these other things, you can be a sole founder and you can build in code without ever knowing how to build in code.

23:41And then I think that the third biggest change that I've gotten to see is that really tech was very consumer tech. I mean, you think about the early companies from Amazon to Facebook, they were consumer tech companies. And I think this next decade is a lot about reshaping industries that have been less touched by tech and it goes well beyond consumer. I think AI and embodied AI and robotics is going to touch every different aspect of people's lives. And so it's just so much more pervasive. I think deep tech, you know, we started as deep tech investors, global deep tech investors. And I'd say that was somewhat anachronistic when we started.

24:24Some people were like, are you sure you don't want to just live in Silicon Valley and invest in really cool social media companies because your co-founder knows social media? And we said, no, we want to do something that's harder. We want to do global VC. We want to invest in deep tech. We, you know, we think that deep tech is going to change the world. And I'd say we were maybe, you know, five, six years ahead of the time. But now I think no one argues that the fact that things like generative AI and advanced semiconductors are absolutely impacting everyone's lives. and raj just as we sort of wrap up this conversation we have spoken about ai through this entire chat but of course it's such a such a huge word such a huge term and i just want to get your your thinking on how you think the returns are going to be made because you know we look at these companies that are producing the models who are raising astronomical sums of money with insane valuations.

25:21And not all VCs can get in on this. And then you've got companies that are trying to build on top of these models and do something different as well. Are there parts of the market at this point you feel are a bit frothy, are in a bit of a bubble? And I guess, where do you think the longer term value in terms of harnessing AI is going to be made for investors? Yeah, I think two things which somewhat are opposing are absolutely true right now. I think first is that we're in the very early stages, the third or fourth year of this AI super cycle. And it's probably a 20-year super cycle. Maybe it's a 15-year super cycle, but it is going to change the world in every aspect of the world, how we develop drugs, how we interact between people and machines, and frankly, just what's the role of employment and the job market.

26:15I think we're going to see profound changes. On the other hand, in a short-term basis, I do think we're in a bit of a bubble. I don't know if we're in the first year of the bubble, the second or the fourth year, the last year of the bubble. This is a long cycle. I think it's frothy because people think that in the next five years, AI is going to change the world. It always takes longer than what people think. And then as the reality and the hype start to kind of settle in, then people get disappointed and the valuations come down. And then eventually, I think you will see that AI will have the profound impact that we all want and expect, but that it takes longer.

26:55And so our goal is very simple. We try to be very disciplined about the way we're deploying capital. We believe great businesses are built all the time. We're not going to get out of the market, but we're trying to be sensible about finding great founders, backing them earlier, getting in at more reasonable valuations. But VC is not a value, you know, it's not a business for the faint of heart. You've got to be willing to back the best founders. And what we've seen over 20 plus years of doing this is that the best founders and the best teams tend to raise money at higher valuations. And we're, you know, we're all about backing the best founders.

27:34Great, Raj, it's been a pleasure talking to you. Thank you so much for joining me on Beyond the Valley. Thanks, Arjun, for having me. We'll be back in the next few weeks for part two of this special series on Singapore's rise as a global tech hub. Thanks for listening and watching.